The R. E. Lucas (1978) general equilibrium model of asset prices is extended to admit beliefs that are represented by a (nonsingleton) set of probability measures. A primary motivation is evidence, such as the Ellsberg paradox, that people are averse to vague or imprecise probabilities....

This paper constructs a space of states of the world representing the exhaustive uncertainty facing each player in a strategic situation. The innovation is that preferences are restricted primarily by 'regularity' conditions and need not conform with subjective expected utility theory. The...